June 27, 2010 11:45 pm

China proves tough road for Japanese carmakers

Workers at a supplier to Honda in China

Workers at a supplier to Honda in China demand higher wages. Over the past month, eight Honda and Toyota suppliers in China have been hit by strikes

When a strike broke out at a Honda components factory in southern China this month, the Chinese deputy general manager pleaded with his assembly line compatriots to return to work.

After the workers refused, a senior executive from Guangzhou Automobile – a Honda partner in the Japanese company’s nearby assembly plants – was dispatched to negotiate.

As the dispute threatened to spiral out of control, the only trace of the Japanese executives at Honda Lock was the signature of the expat general manager on a stern notice to workers, warning them to return to their posts or be dealt with “according to relevant national laws, regulations and company policies”.

Were it not for the workers’ distinctive Honda uniforms, the dispute might have been seen as merely a local affair.

Yet analysts say its causes can be partly traced to Honda’s roots in Japan, a country whose painstaking and often insular management style can travel poorly outside its borders.

Industrial unrest is hardly unusual in China, where grievances held by a new generation of young migrant workers are both deep and widespread.

Foxconn, the Taiwanese electronics group that makes gadgets for western brands such as Apple , is raising pay and revamping its “factory town” business model after a spate of suicides at its main plant in southern China.

Strikes hitting Japanese carmakers
Factory Start date End Workforce
Honda Autoparts Manuf (Foshan) May-17 Jun-04 1,900
Foshan Fengfu Autoparts Jun-07 Jun-09 460
Honda Lock (Zhongshan) Jun-09 Jun-18 1,500
Tianjin Starlight Rubber and Plastic Jun-15 Jun-16 n.a.
Nihon Plast (Zhongshan) Jun-17 Jun-18 n.a.
Tianjin Toyoda Gosei Jun-17 Jun-19 800
Denso (Guangzhou Nansha) Jun-21 Jun-25 1,100
NHK-UNI Spring (Guangzhou) Jun-22 Jun-23 n.a.
 Sources: Companies; media reports

Yet in the automobile industry, at least, Japanese companies stand out for the frequency and seriousness of recent labour problems.

Over the past month, eight Honda and Toyota suppliers in China have been hit by strikes, which in many cases have forced the shutdown of the larger assembly plants that rely on their output.

“When it comes to their China operations, Japanese companies have merely changed location. They haven’t changed their way of doing business at all,” says Hiroyoshi Ikeda, chief executive of Myts, a consulting firm that advises Japanese companies expanding overseas.

Mr Ikeda and other experts note that Japanese manufacturers typically bring their tightly knit keiretsu relationships with them to China, making them more dependent on a small number of trusted suppliers. Since those suppliers often struggle to pass cost increases on to their “customer” parents, they are under greater pressure to keep a lid on worker pay.

“[The strikes] have brought out the weakness in Japanese-style just-in-time production,” says Kiyoshi Kasahara of Rikkyo University.

When workers strike, Japanese groups’ taut supply lines mean shortages ripple quickly along the chain, turning what might have been a minor nuisance for a US or European car assembler into a major disruption.

Politics and culture may also be playing a role. While none of the strikers interviewed by the Financial Times over a period of weeks expressed explicitly anti-Japanese sentiment or referred to Japan’s invasion of China in the 1930s, analysts say local authorities may be more reluctant to crack down on strikes at Japanese companies.

In the past, accusations that leaders have gone soft on China’s one-time enemy have escalated into broader anti-government protests.

In interviews, workers did complain about their Japanese supervisors’ remoteness and vastly greater pay packages. “They don’t speak Chinese – all communication is through interpreters – and they make tens of thousands of yuan a month,” said one worker at Honda Lock, who earns a basic monthly salary of Rmb1,130 ($166).

Such grievances highlight what experts say is Japanese carmakers’ slowness to promote Chinese employees to management positions.

Japanese companies see meticulous co-ordination of everything from component deliveries to greetings on the factory floor as one of their biggest competitive advantages – a perception that has made them reluctant to yield control to outsiders.

“Japanese executives don’t really trust foreigners,” says Yukio Kajita, a professor at Reitaku University. He notes that it has taken decades for Toyota, Honda and others to install high-ranking local managers in the US and Europe.

“[Chinese workers] conclude that even if they work hard they won’t advance.”

Mr Kasahara at Rikkyo says Japanese companies may also place too much faith in China’s state-controlled official union, whose one-shop-per-company structure superficially resembles Japan’s.

The union is often distrusted by workers, and many western groups have gone out of their way to build informal grievance networks to get around it.

Additional reporting by Patti Waldmeir in Shanghai and Bernard Simon in Toronto

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